The retailer posted another strong quarter with Q4 sales up by 10.6% driven by ongoing investments and ecommerce. We look at some of its predictions for 2021 in terms of performance, ecommerce, promotions and the importance of fresh and health and wellness.
Q4 results and full year performance
Kroger continued to perform ahead of the market with CEO Rodney McMullen saying: “Kroger delivered strong results during our fourth quarter and for the full year 2020. We continue to gain market share and full year results were above the guidance we shared with you last quarter”.
Key indicators and insights from Kroger FY 2020 results:
- Identical sales for FY 2020 grew by +14.1% to $132.5bn (excluding fuel)
- Digital sales grew by +118%, including +249% for home delivery services
- Digital accounted for 5.5% of the entire group’s turnover (excluding fuel)
- COVID-19 related investment equal to $1.5bn
- Our Brands (private label) total sales increased to $26.2bn
- 98% retention rate for customers engaging in both in-store and online
Source: IGD Research
Kroger’s five predictions for 2021
In addition of the usual performance and results announcement Rodney McMullen and CFO Gary Millerchip shared their thoughts and predictions on the year to come at Kroger
- Sales down by 3-5% vs 2020: with other parts of the economy planned to reopen and the tough comparisons from 2020 sales due to the unusual environment, Kroger expects negative growth for 2021. McCullen added: “We would expect our market share overall to be very similar to where it is today. When you look at minus 3%, we expect to gain share, at the minus 5% we would expect to be pretty similar to where we are today”.
- Strong momentum for ecommerce and retail media to continue: Kroger will continue to heavily invest in these two areas as they contributed strongly to drive new shoppers. Regarding ecommerce, the main objective will be to drive profitability and grow capabilities with the Ocado fulfillment centres expected to highly contribute to this. Kroger also plans to push further its retail media tools for CPG companies. This is gaining traction with its suppliers as it can enable personalisation and provides unique access to shopper data and insights.
- Fresh is, and will remain a key differentiating point: during 2020, the retailer noticed an uplift in the consumption of fresh products and cooking ingredients as shoppers were cooking more at home. According to McCullen “Fresh is the number one driver on where people decide to shop” and so Kroger will continue to improve the quality and value of its fresh food offer.
- Health and wellness will be a tailwind for the group: new prescriptions at pharmacies should be bouncing back and customers will return as availability of services will improve again due to the lesser impact of COVID-19. Kroger also expects the demand for healthier products to continue to grow as it saw the engagement in its Simple Truth brand grew by 18% in Q4. For the first time, the healthy private label brand annual sales reached more than $3bn.
- Stronger promotional environment: CFO Gary Millerchip expects to see more promotional offers across the grocery retail industry this year compare to 2020 due to many retailers reducing or stopping promotions during the past 12 months. According to McMullen the customers’ sensitivity to price didn’t change much. However, they noticed that when shoppers had money they tend to spend more and trade up to better quality products.
For 2021, the impact of COVID-19 will be reduced but there will still be an impact on Kroger’s performance . The retailer expects a return to a sort of “normal” trading environment for 2022.
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